August 2018

The market made new all-time highs this week, but with the upcoming holiday and short trading week, look for consolidation or continued sell-off. The indicators in the very short term and short term are suggesting a selling initiation. Add to that the highly bullish sentiment charts and it spells weakness in the week ahead.
The ultra-short-term indicators of breadth and the VIX show declining breadth numbers. Granted today advances did outrun declines, but the reading is still lower than the previous positive readings from earlier in the week. The VIX is getting very close to the lower
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Editor's Note: This article was originally published in John Murphy's Market Message on Wednesday, August 29th at 12:33pm ET.
Before leaving on vacation on August 15, I expressed concern about the fact that foreign stock ETFs were lagging too far behind the U.S. which could threaten the uptrend in the S&P 500 which was nearing a test of its January high. The message suggested that U.S. stocks needed more help from foreign stocks in order to reach new highs. In the two weeks since then, foreign stock ETFs have actually risen more than in the states. That helped support new highs
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Here's a fact: Traders gravitate towards companies that beat earnings expectations. Why? Because they know they are putting their money to work in companies that outperform.
Here's another fact. MANY companies that report and beat earnings expectations often gap up - move higher - on positive news and ALWAYS (at some point) pullback to levels that make them attractive trading candidates. Here's a prime example below:
As you can see from the above chart on GrubHub, they reported and beat earnings expectations that resulted in a significant gap up on extremely high volume on July 25. The
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Facebook (FB) has been an internet and stock market leader for the last five years, but I believe the run is over. Not only did FB report quarterly revenues that missed Wall Street consensus estimates for the first time in more than four years, but they also lowered future operating margins to the mid-30s% range. Wall Street was expecting 44% and 45% for the next two years. That type of operating margin reduction requires a steep discount in valuation and Wall Street is in the midst of revaluing FB. While the deterioration in fundamentals resulted in a huge
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This week the market was rocking and rolling with large price swings. The DecisionPoint Scoreboards reflect new negative momentum for each of the indexes, but after logging those Price Momentum Oscillator (PMO) SELL signals, the market did an about-face and began to pull PMOs back up or slow their descent.
The SPX and OEX have similar features to their charts so I'll talk about them first. The first thing that I noted visually was the possible head and shoulders pattern that could be developing on both indexes. This is very early in the formation stagethe right shoulder hasn't
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The first rule of trading is to stay on the right side of the broad market trend. There are different indexes and indicators we can use to determine the broad market trend, but few are as efficient as the S&P 500 and its 12-month EMA.
The chart below shows monthly bars for the S&P 500 with the Percentage Price Oscillator (1,12,0), which measures the difference between the 1-month EMA and the 12-month EMA. Note that the 1-month EMA is essentially the monthly close. The long-term trend is up when the PPO is positive and down when the PPO is negative. Showing the PPO as a histogram
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Investors in growth stocks had another troublesome week. The bifurcation continued as the NASDAQ 100 $NDX breadth data had a tough week while the $SPX breadth improved. Three stocks of interest showed up on the most active list for the $SPX to highlight the trend.
Equifax had a data breach last year in September. While it has rallied well off the lows, this week it started to push above the resistance that has been in place since January. With the SCTR moving above 80 and the MACD turning up while staying above zero, this looks like a good momentum move. Equifax
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Q2 Earnings season has come and gone with the overall market response being mostly positive. And the good news for traders is there are plenty of companies that beat expectations, made nice moves higher and could become high reward to risk trading candidates on pullbacks.
As just one example, take a look at the chart on GrubHub, a company that reported their numbers on July 24 and easily beat earnings and revenue expectations;
You can see from the chart above that the response
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Editor's Note: This article was originally published in John Murphy's Market Message on Thursday, August 16th at 2:12pm ET.
U.S. stock indexes are having an unusually strong day. Chart 1 shows the Dow Jones Industrial Average climbing more than 400 points (1.6%) in afternoon trading. The Dow tested its 50-day average yesterday and held. Chart 2 shows the S&P 500 trading 1% higher. Yesteday's pullback held above its June peak and 50-day average as well. Chart 3 shows the Nasdaq Composite Index also holding above its 50-day line. All market sectors
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Instead of showing asset class rotation or sector rotation, Relative Rotation Graphs can also be used to show rotation among various market segments.
You have all seen or heard about a breakdown of the market in large-, mid-, and small-cap stocks. And maybe also the breakdown between growth and value stocks.
The stock market can be seen from a lot of different angles. The good news is that index providers like Dow Jones are providing us with indexes that capture all these different market segments.
In this post, I want to show you how you can use Relative Rotation
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Just a reminder, I am the opening speaker kicking off Chartcon 2018 on Friday morning, August 10th! DON'T BE LATE! I hope to be one of the strongest presentations to kick this off. While I love the SCTR, my presentation this year will be a totally different method of simply finding great set ups based on some of the biggest names in Technical Analysis. I am up against some fabulous speakers so I have my work cut out for me.
Seriously, when do you get to hear published authors Martin Pring, David Keller, Greg Morris, Alexander Elder, John Murphy, Arthur Hill, and Greg as
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Buying is so easy. When you pull that trigger to buy, optimism abounds. Maybe it was a recommendation from a friend. Perhaps there was water cooler talk of the next Apple (AAPL). You might even have uncovered it from a time-tested scan. The reason doesn't really matter. The bottom line is you believe the stock just purchased is going to make you money. It might. It might not. The bigger question is have you thought about when you're going to sell.
Keep in mind that I write this blog article from a short-term trader's
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Relative Rotation Graphs are a great tool to visualize equity sector rotation and they are probably most used for that purpose. However, there are many more areas where RRGs can be used to get a big picture view of what is going on among a group of securities or related financial instruments.
Commodities
One of these areas is commodities. Here at Stockcharts.com commodities are regularly commented on by Greg Schnell, among others, who even has the commodities countdown blog, dedicated to the commodity markets.
As there are many commodity-related indices
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Trend following strategies are built on the premise that trends persist and we can make money by simply following the trend until it ends. There will be losers along the way, but a few strong trends will more than make up for the losses. It sounds great in theory, but putting it into practice is, of course, another matter.
The first step to trend following is finding strong uptrends. As far as stocks are concerned, we should also focus on leading stocks. Thus, we need an indicator that captures strong trends and upside leadership.
Enter the humble Price Channel, also
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Editors Note: This article was originally published in John Murphy's Market Message on Thursday, August 2nd at 1:43pm ET.
TARIFF THREATS PUSH CHINESE MARKETS LOWER Threats of higher tariffs on Chinese imports, combined with Chinese threats of retaliation, put international markets on the defensive today. It started in Asia, spread to Europe, and caused a lower stock opening here. China took the biggest hit. The red line in Chart 1 shows the Deutsche X-Trackers CSI 300 China A-Shares ETF (ASHR) falling more than 2% today to the lowest close in more than a year. That helped pull
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What's a technical guy doing talking about fundamentals? Well, I believe that charts of fundamental data are as useful as price charts in helping us visualize fundamental context and trends. In the case of earnings, the following chart shows us where the S&P 500 would have to be in order to have an overvalued P/E of 20 (red line); fairly valued P/E of 15 (blue line), or an undervalued P/E of 10 (green line). I have added three hash marks on the right side of the chart to show where the range will be at the end of this fiscal year based upon earnings estimates for 2018 Q4.
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Hello Fellow ChartWatchers!
Can you believe that we’re just ONE WEEK AWAY from ChartCon 2018? Our 5th online investing conference goes LIVE on the morning of August 1oth at 10:00am ET, and I can hardly contain my excitement. The presentations have been sent in, our bonus videos are ready to go, and the speakers start arriving in Seattle this weekend. In short, we're ready to bring you two of the most transformative, inspiring days you can imagine.
Now that we’re only a few days away from the conference, our Support Team has been receiving plenty of
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